Second charge: The broker wishlist

by: Christine Toner

According to the latest figures from the Finance and Leasing Association second charge lending in the first five months of 2017 was up 12% by value and 9% by volume on the same period last year, and May witnessed the third consecutive month of growth.

Yet ask any second charge specialist how the market is faring and they’ll tell you take up of the product isn’t as good as it could be – largely because seconds have yet to be fully embraced by the mortgage broker community. Indeed, the surge we were all expecting following the implementation of Mortgage Credit Directive (MCD) which saw second charges brought in line with their first charge counterparts never quite materialised.

Ask those same experts why this is and they’ll say more education is needed. But over a year on from MCD, are mortgage brokers really still in the dark about seconds? Is the sector paying attention? Or is there something else putting them off?

Specialist Lending Solutions put these questions to the industry.

“It’s too much to learn”

Matt Cassar, managing director, Finance Advice Group

“We have been pushing second charge mortgages to the advisers within our network for almost a year now. Unfortunately and despite our best efforts to provide training, the vast majority of advisers feel that it’s too much for them to learn in terms of submission processes and lending criteria for seconds in addition to the first charge mortgage criteria.

“They will still recommend second charge mortgages if it is the right advice for their clients, however they will usually still refer to a specialist master broker rather than doing the recommendation and submitting the application themselves.”

“Lenders need to react to change”

Jonathan Burridge, sales manager, The Mortgage Broker

“I would suggest that the market size is being established, seconds are an alternative to remortgages and further advances and are considered. We use Twenty7tec and have resources to review second charges as an option, but, lenders need to react to the changes of regulation and make direct broker access more widely available.”

“Brokers see it as not worth the effort”

Alan Dring, industry consultant.

“In my experience too many brokers do not give enough consideration to the longer term benefits of securing a second charge loan and simply see the option as not worth the effort under a regulated regime rather than seeing it as a possible long term loss leader.

“Of course they’re not a fit for everyone but if you end up with a satisfied client, the long term income potential should be improved…if the broker has the right business expansion model in place “

“No market commentary about the FCA being unhappy”

Phil Whitehouse, managing director, MCI Mortgage Club

“As ever there is no easy and straightforward answer as to why mortgage intermediaries have not engaged with secured loans as most commentators predicted.

“I would say that feedback I have received still centres around intermediaries not being sure whether they should actively get involved or simply refer loan enquiries to master brokers or side step the whole scenario.

“Alongside this, is the fact that in reality, there has been no market commentary about the FCA actually ‘being unhappy’ with any intermediary for not being involved in secured loans at a ‘capital raising remortgage enquiry’ and sadly, it seems that such stories might be the tipping point when intermediaries get serious about secured loans.

“The lenders and specialist providers have done so much over the past few years in relation to education, reduction in fees and easier sourcing of loan enquiries etc that it is hard to see what more can be done without the intermediaries themselves embracing secured loans as a viable option.”

“The fee issue still needs addressing”

Martin Stewart, founder, London Money

“Yes as brokers we need to be educated but you can say that about many aspects of the market. Historically we tend to dip in and out of specialist areas as and when the need arises rather than set our stall out to work only in certain sectors.

“The simple fact is that the fee issue still need addressing. I have one question for the second charge market – I am in the process of getting paid £600 all in for a £30,000 first charge mortgage. Why, therefore, should I expect to get paid £2,000 for a £30,000 second charge? Until the industry answers that question satisfactorily then second charges will continue be a product of last resort for many brokers.”

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